What changed
This 2009 Master Circular consolidates all existing instructions on direct investment by residents in Joint Ventures (JV) and Wholly Owned Subsidiaries (WOS) abroad into a single document. It replaces earlier circulars and notifications, providing a unified reference for banks and investors. The circular includes a sunset clause, expiring on July 1, 2010, after which an updated version will be issued.
What it means for you
For banks, this circular simplifies compliance by centralizing all relevant rules on overseas direct investment, reducing the need to track multiple circulars. It clarifies the automatic route, funding methods, and reporting obligations, making it easier to process customer applications. Banks must ensure their designated branches are familiar with the consolidated procedures to avoid errors in remittances and documentation.
What you must do
- Review the consolidated instructions to ensure your bank's procedures align with the master circular.
- Train designated branch staff on the automatic route, funding methods, and documentation requirements for JV/WOS investments.
- Update internal checklists to include obligations like obtaining Unique Identification Number (UIN) for each investment.
- Monitor the sunset clause and prepare for the updated circular expected by July 2010.
Who it affects
All banks authorized to deal in foreign exchange, Resident individuals and entities making direct investments abroad, Designated branches handling overseas investment remittances
What is the validity period of this Master Circular?
The circular has a sunset clause of one year, meaning it will stand withdrawn on July 1, 2010, and be replaced by an updated version.
Does this circular introduce new rules for overseas investments?
No, it consolidates existing instructions from earlier notifications and circulars into one document for easier reference. No new rules are introduced.
What are the key sections banks should focus on?
Banks should focus on Part II (Operational Instructions), including designated branches, procedural instructions, allotment of UIN, and verification of investment evidence.